“Uncertainty has become the norm”

December 2013

Conversation with Ignacio Garcia Alves, chairman, Arthur D. Little on – ADL’s origins – realigning the company’s core strategy – helping businesses to continuously innovate

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Here is the transcript of the video.

Emmanuel Daniel (ED): Which country are you from?

Ignacio Garcia Alves (IGA): I’m Spanish, but I’m one of these people who travel around a lot. I’ve been living in five different countries now – the Netherlands, UK, Spain, France, and now I’m Belgium.

ED: Okay. But you’ve always been with Arthur D. Little (ADL)?

IGA: Yes. I’ve been with ADL since 1992. Before this, I’ve had some experience with other companies, but I’m a loyal person. It’s been almost 22 years since I first joined ADL.

ED: It’s been a while since I’ve been able to speak to the global head of a large consulting firm, which used to be very aggressive but has become much more tactical over the years. Give us a sense of the consulting business – where it is today, and what’s the niche that ADL plays in all this?

IGA: We’ve been in this business for 127 years.

ED: You started out as a chemist?

IGA: We started out as a research and development (R&D) organisation in the technology field. The needs of companies were evolving, and in our early years, it was more about helping companies with technology and those who were looking for new chemical formulas or molecules.

They realised that we were doing something well, in terms of how we organized our own internal research. So, they came to us to help them organise their first R&D labs. This all seems very normal now, but more than one century ago, it was not about innovation or R&D – it was about invention.

That’s how ADL started, from a chemicals laboratory which then expanded into other technologies. Afterwards, it evolved again to help organise technology, identify what technology meant and how can we industrialise the process of R&D.

Companies then asked us, “Can you help us with how we bring this to the market?”, so it became more and more geared towards marketing and of course you start asking questions about strategy.

This took maybe 70 years; this whole process until the 1960s, when ADL was a pure American company, started to expand into other regions like Europe and then Asia, Latin America and other. I think today consulting is changing again.

1. The changing face of consulting

ED: In that sense, your DNA is somewhat different from McKinsey?

IGA: Yes.

ED: McKinsey is essentially a management consultant in the truest form whereas your DNA has been based on an industrial product.

IGA: Yes. It’s an important question you ask me because we are looking at our roots and trying to understand changes in the consulting business and how we compare with others. I believe that ADL has roots not only in technology but also in creativity.

We were involved not only in technology invention but also in the invention of new methods. For example, how companies should go about certain things like marketing, penetrating new markets, how to link technology maturity with market maturity – we were very good at addressing things like that. Other companies, they were more born in the second industrial revolution where it was more about optimising things, information technology and about how to treat information and make new methods out of that.

ED: Listening to the company’s origins and initial DNA, there are actually very few and focused types of businesses that ADL would be useful for relative to another consulting company.

IGA: No, I don’t think so. We are not exclusive in the sense that we can only address certain industries because all industries are impacted by technology currently. All industries, especially at this current stage, need creativity; they need innovation and these roots of ADL, I think that they become extremely important today.

ED: What does your balance sheet look like today as a business? How much of your business is pure consulting and how much of that is for clients who are originating products in the marketplace? How much of that is change management?

IGA: I would say that ADL is now a pure strategy consulting firm. We’re now purely focused on strategy and technology consulting, but not in the sense of doing technological projects for our clients.

ED: In that regard, are you saying then that you don’t have a focus on systems integration, application part and neither do you have focus on the financing part of strategy which is private equity?

IGA: We do have a focus on the private equity part. We do a lot of due diligences and also value creation plans post-acquisition because for many companies, they need to understand where the market is going, what is the impact of technology, what is the business model of this other company. In that sense, I think we’re one of the leading players, mainly in areas where technology plays a role.

ED: What is the global footprint looking like? Are you following your clients to other parts of the world and how’s that footprint building for you?

IGA: We are a global company so we have a presence in all continents from North America, Latin America, Europe, Africa, Asia and Middle East. We have approximately 30 offices and we see indeed that the questions of globalisation are very important ones. It’s not that so much about following our customers; we are anticipating where they might need our help and ensuring that we have the necessary local presence.

ED: There was a period where you lost your way as an organisation; maybe you were in too many things and then you needed to re strategise. Tell us about that process.

IGA: The first decision that we made was to concentrate on strategy consulting. In terms of focus, we now have a clear target. We now mainly serve two type of industries.

The first one is what I call the network industries, which is about telecommunication, IT, media, electronics, utilities and energy, and transport. The second group we serve is made up by manufacturing and the materials-type industries.

We’ve historically had a stronghold on these industries. Also, these industries are the ones that will transform the world in the coming years. We’ve heard about smart cities or how that is evolving, we believe that the infrastructural industry is very important, as well as the impact on materials and manufacturing.

ED: So, in all the industries that you serve, is the work that you do in the long-term, rather than immediate? This is a very important question because in the telecommunication and materials industries, for example, going to market is a rigorous discipline and it’s very important to be able to go to market very 9 to 18 months.

IGA: It’s not so much the opposition between the long term and the short term, but more about working on what I call the positive parts of consulting, which is about growth and innovation, rather than on the negative parts, which could be about restructuring and cost-cutting.

We have a stronghold in the part where it’s about growth, innovation, transformation of companies.

ED: What is the general timeline that you work with?

2. Addressing clients’ evolving needs

IGA: Consulting has evolved a lot and it’s very difficult to sell projects with a 20 year vision. Currently, customers want to have projects where we look into the future but where we help them in the short term. They need tangible things on which they can work on. Previously, it was more about establishing a strategy project for a client, followed by a project on how the client need to innovate, and then another project on how to introduce innovations to the market.

This sequential approach is much less current. It’s now more about, “Help us now and we immediately implement”. We have done even projects on identifying growth for companies on a success fee basis. They wanted quick results within 12 to 18 months. This is changing the way in which we do consulting also because information has become much more accessible.

There’s maybe way too much information. A lot of sciences have diffused into a company so they are looking less at making itelf look intelligent but more at appearing creative or flexible.

ED: Talking to you about creativity as opposed to change management – change management is a lot more procedural, it’s more operational. There are many operational elements in there. Here, you actually have to take a view in terms of what’s original, and maybe pick innovations to bet on. What is the best form of interaction with clients to help them in this way?

IGA: There’s the saying “Don’t fish for me, but teach me how to fish.” I think that’s what we try to do. The whole concept is about ensuring that we help the client on the spot; not only on lessons of creativity, but also how to do other projects.

To give you an example, we work a lot with telecom operators. In Europe, telecom operators are looking to transform themselves. We are helping them to reinvent through management. Because in the end, the management will need to implement these changes – from old fashioned telecom operators to become more like internet players, and adopting the culture of these players.

ED: Let me test you on that. Assuming that Blackberry was your client, how would you guide the brand to be continuously innovative?

IGA: When I look at Blackberry – we have been studying that a little bit – I think that the brand is an incredible example of a company that found its spot in what nobody believed in initially – mobile internet. They did it at a moment where counter-cyclically, people didn’t believe that mobile internet could work. It was just after the bubble of 2000/ 2001. After that, you need to recognise that things go through life cycles. Blackberry didn’t realise that this was not something that would last forever.

We try, when it’s possible, to help companies when they’re still in the success phase to anticipate what will change in their businesses – what is the environment and how will that change – so that they can put in place the necessary diversifications or the necessary strategic changes to do that. We try to help them continuously reinvent themselves.

They need to concentrate on what is essential, and find the necessary space in terms of financial means. Because one of the problems that companies have is generally, when the problem hits, the success of the market is not there anymore, and they also start to have financial problems.

ED: Let’s talk about your most successful clients – are they based on a counselor-relationship or are they technical? Instead of long-term relationships, are they project-based?

3. Helping businesses reinvent themselves

IGA: That’s a very good question, because you have different philosophies in consulting. While we understand long-lasting relationships with clients, it does not necessarily mean that they are permanent relationships. We tend to work in a project-based setting where we do a project and go off for some time, the client continues, we get in again, and it’s the on and off which we believe has a lot of impact.

ED: Going back to your response to my question on Blackberry, being European, how does the phrase “only the paranoid survive” come across to you? Is that something that you believe in? Or is there a European version of only the paranoid survive?

IGA: I believe a lot in that phrase. I think the right way to do business is to look at the short term strategy and ensure that it works, while keeping in mind the factors that could potentially destroy your business. I think that not many companies are good in that effect. I believe that companies in Europe have become more Anglo-Saxon than the original American model. Where they have a much more long term vision about how they want to be in the market and what they want to implement. So we recommend that companies define what they want to become, and what could go wrong.

And what could you do to anticipate that. I call that the insurances that you need to have in your business. Clients tend to love the certainty, and sometimes they want to use consultants more like an oracle. But I’m telling our clients that uncertainty has become the norm. The real question is how you capture uncertainty; you cannot capture that by trying to find certainty back. You can only capture what I call the insurances for whatever is uncertain – what are the strategic levers, what can you do in any given environment to push forward in the future.

ED: The concepts that you have just described to me, how are they applied to the services industry, especially financial services; innovation, originality?

IGA: In the financial services industry, the internet has a big impact. Technology is making a big impact. Prevalence of the internet means that the clients have the power. So banks are pushing for innovation to take place and many want their services on an iPad. Banks now see the internet as a very interesting way to differentiate, to offer new services.

ED: For China, India, Brazil; you need to be engaged in these countries. The way in which they buy consulting services is a new culture to them. So how has that culture been evolving, and are you part of that process?

IGA: Yes, we are part of that. We have offices in India, China, Korea, Japan, and a network also in Southeast Asia. As you’ve said, it’s a challenging task. Because in some of these countries, consulting is perceived as advice you’d give a friend. Why should you pay for advice; something intangible? But we have different types of clients, some from more mature countries that want to invest there. So then it’s a more classical approach of consulting.

We’ve also got clients which are emerging companies trying to understand how they can be more successful in more mature countries. We also help advise governments on how to industrialise or further develop their economies. We are quite flexible, I would say, in our approach.

ED: In some of these countries, do you need to be even more localised in order to be successful?

IGA: It depends. I would say that most of our clients evolve very quickly. In the beginning, they preferred to have foreign experts that could really bring extra experience to their table. This is the initial stage. In the second stage, they want to have more local knowledge of their markets, using foreign experts. At the third stage, they’d want to more and more local people because it’s more about this change management and how to interact with local people. And then, at the end, they reach a stage where it’s “Bring me the best experience; I don’t care where it comes from but I want to have the best experts and have also some local flavor linked to them.”

ED: In your professional opinion, for consulting firms that offer a very holistic approach – from systems integration, private equity advice, to outsourcing – do you think that’s a viable model? What is your view in consulting firms that have become industry behemoths?

IGA: I think it’s an evolution where two different opinions are really opposed in some way. You have the model where people want to be fully integrated and they say there’s an advantage; “We’re one-stop shop and offer everything”. We believe that there is a conflict of interest. You cannot be a serious strategy consultant and have a potential conflict just because you might have an interest in implementing a big programme behind it. So we believe that still, the division between the strategy advisor and the implementer is necessary to prevent our advice being compromised.

Our answer to that is what we call the open consulting model. We believe that the world has changed; that you cannot pretend to have everything in-house. Even the biggest player cannot have the best competencies everywhere. We are in a model where we want to network, and select the best partner, according to the situation of the client. Instead of saying we have a number of companies inside, we say we have access to the whole world. We can team up with many companies to offer the best solution, depending on what the client really needs and whether there is a conflict of interest or not. We can be flexible in that sense.

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